The improving economy has spurred a quick turnaround in the commercial real estate market. Growth, particularly in small- and mid-sized companies, had begun to lower vacancy rates in the four major property types, with the result of driving the value of many of the properties needed to house them.

The increasing value has attracted investors who, in turn, are being chased by millions of dollars in loan capital that was scarce only two years ago. This sequence of events has led to increased interest in the sales market, but getting the right seller together with the right buyer is still the most practical concern.

This union is somewhat complicated by the new "cycle" which has led to a few unanswered questions: Who is in the market to buy?; How do you reach them?; and How are properties being priced?

Answers to these and other questions will be the focus of "Sources of Equity Capital," a panel session scheduled for NAIOP's RealMart convention, which will be co-sponsored by NATIONAL REAL ESTATE INVESTOR October 16-19 at the Mirage Hotel in Las Vegas.

"We are seeing that investor interest has turned," says Paul Boneham, the panel's moderator and senior vice president with Chicago-based Heitman Financial Services. Investors believe that, instead of buying into a declining market, they are buying into a rising market and, therefore, they are excited to get in. As a result there is a velocity to the market that has been missing for four years.

"This panel will discuss the current investor market for commercial real estate," he explains. "This is to say who is buying, what they are looking for and how they are pricing it."

He adds that the audience for the most part will be owners and owner/developers. The question on their mind is: Is this a liquid asset that I own and do I have the opportunity to sell in 1995? But even those not interested in selling are interested in the price they could get.

"Just as you would with stocks," says Boneham, "even though you don't intend to sell, you probably looked in the Wall Street Journal this morning to see what they were worth."

In addition to Boneham, who is in charge of property dispositions within Heitman's pension fund accounts, the panel includes: Craig Severance, principal with San Francisco-based AMB Institutional Realty Advisors, who is in charge of the company's pension fund acquisitions; John Stanfill, with Los Angeles-based CB Commercial Real Estate, who is responsible for investment property sales; and Roy March, president of New York-based Eastdil, a Wall Street investment banking firm solely focused on real estate.

"So our panel includes two principals, one dealing with acquisitions and the other with disposition, and two intermediaries that help with these transactions," says Boneham. He adds that this balance to the panel, along with questions from the audience, should cover the topic from all angles.

Boneham has moderated similar panels in the past and says the topic always stirs a lot of interest, and he believes the state of the current real estate market will only enhance interest this year.

Each of the four panel members will take one of the four major product types -- office, industrial, retail and apartments -- and discuss present and past occurrences in the market, including new construction, current investor interest and who are likely to be the most interested buyers.

"It is very important to understand who your target market is when you are selling a property," stresses Boneham, "and to craft the message and aim the delivery of that message to that target market."

These sales targets include five major categories: pension funds, private investors, foreign buyers (usually from the first two categories), insurance companies and REITs. The panel will discuss these buyer types, including their current level of appetite, what kind of properties they are looking for and how they are pricing them.

"Frankly, each product type could have a different target market depending on a lot of factors," says Boneham. He adds that there are two sets of factors, those involving the property as well as those involving the potential investor type. Property factors to be considered include the quality of the property, its leasing status and the market in which it is located. Factors involving the investor include the amount of capital in the market and how much of each property type the investor already has in its portfolio.

"It is very hard to generalize because of the number of factors involved," says Boneham. "So we will be trying to give the audience a general feel of how the buying decisions are made."

The panel will also discuss cap rates, based on the scale of quality and price per square foot as well as other parameters that are being used to determine the price of a property. In addition, the panel will touch on property improvements which can be made just prior to a sale that can mean added returns by significantly augmenting the price. Boneham says these improvements can vary from physical changes, such as roof and parking lot repairs, to leasing changes, such as lengthening the leases of major tenants or reducing roll-over exposure by staggering when tenant leases come due.

Moderator: Paul Boneham Heitman Financial Services

Panelists: Craig Severance AMB Institutional Realty Advisors John Stanfill CB Commercial Real Estate Roy March Eastdil